Over the past two decades, technological progress in the United States has
been biased towards skilled labor. What does this imply for business cycles?
We construct a quarterly skill premium from the CPS and use it to identify
skill-biased technology shocks in a VAR with long-run restrictions. Hours fall
in response to skill-biased technology shocks, indicating that at least part of the
technology-induced fall in total hours is due to a compositional shift in labor
demand. Skill-biased technology shocks have no effect on the relative price of
investment, suggesting that capital and skill are not complementary in aggregate
production.